Premier Sotheby's International Realty
ML Meade, Premier Sotheby's International RealtyPhone: (239) 293-4851
Email: [email protected]

Pre- Approval is a More Involved Process Than Pre-Qualification

by ML Meade 01/12/2020


 Photo by Tayeb Mezahdia via Pixabay

When you start looking for your dream home, you need to know how much mortgage you will qualify for. Your real estate agent might ask you to get a pre-qualification letter. However, just because you are pre-qualified doesn’t mean that you will get the loan. You need a pre-approval for that, and even then, the mortgage company might not approve your application.

Pre-Qualification

A pre-qualification letter just tells you how much loan you can afford. The lender does not check your credit, your debt-to-income ratio or other factors before issuing a pre-qualification letter. Additionally, a pre-qualification letter is dependent on the information you provide to the lender. The pre-qualification essentially gives you an estimate of how much home you are able to afford so that you do not look at homes that are not within your range.

To get a pre-qualification, you supply the lender with your assets, debt and income. Because the lender bases its decision on the information you provide, rather than information from outside sources, a pre-qualification is not a guarantee that you will get the loan.

Pre-Approval

Getting pre-approved for a loan usually takes longer than getting pre-qualified. The lender pulls your credit report and might ask for additional documents, including tax records and bank statements. To get pre-approved, you must complete a loan application and provide your social security number. The lender might charge an application fee for a pre-approval.

With a pre-approval, you will have a closer interest rate assessment, that is usually not finalized until the loan goes through underwriting. Once the lender pre-approves you, it will send you a conditional commitment for the loan amount. You can look for homes at or below that price.

In a market when buyers bid against each other – a seller’s market – having a pre-approval letter might give you a step up with the seller, who will more likely choose an offer by someone more likely to get the loan. Thus, if you and someone else submit a bid on your dream home, but the other person only has a pre-qualification letter, the seller might accept your offer, even if it is not as good as the other buyer’s offer, simply because you are more likely to get the mortgage.

For a pre-approval, you will need to:

  • Complete the lender’s mortgage application;

  • Possibly pay an application fee;

  • Supply your social security number and allow the lender to pull your credit;

  • Provide financial information to help the lender make a decision; and

  • Tell the lender how much you plan to put up as a down payment.

After you are pre-approved and the seller accepts your offer, you will then have to provide the rest of the documentation to the lender, including the accepted offer, bank statements, retirement account statements, taxes for up to two years, proof of income and other documents that will help the lender come to a concrete decision.

About the Author
Author

ML Meade

ML is one of the most well-respected and successful Realtors® in the Marco Island market, often achieving top producer status. Continually taking courses and seminars and achieving additional certifications, ML feels it is important to keep abreast of all the latest trends and information available. Regardless of price point or location, she provides every customer with individualized service and a home buying or selling experience that exceeds expectations. ML receives rave reviews from customers for her knowledge of the current market, technical skills, honesty, professionalism, high-impact marketing techniques, listening and negotiating skills. ML believes that charity begins at home and is a member of many community organizations that raise thousands of dollars for local charities. She co-founded the Marco Island Half Marathon, is a member of the Marco Police Foundation and Certified Emergency Response Team, serves as director of the Marco Island Fire Rescue Foundation and is a member of the Marco Chamber of Commerce and 2010 Leadership Marco. She is also a member of the Marco Island Area Association of REALTORS®, Naples Board of REALTORS®, Florida Association of REALTORS® and National Association of REALTORS®. ML’s awards include the Women’s Council of REALTORS®, 2008-2018 Top Producer, Marco Island Area Association of REALTORS® and the Robbie Clark Award. Designations/Licenses: Accredited Buyer Representative, e-Pro Internet Professional, Graduate REALTOR Institute, Senior Real Estate Specialist (SRES)